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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
(MARK ONE)
 
  /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
                                       OR
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
        FOR THE TRANSITION PERIOD FROM ______________ TO ______________
 
                          COMMISSION FILE NO. 0-22300
 
                            ------------------------
 
                        PW PREFERRED YIELD FUND II, L.P.
             (Exact name of registrant as specified in its charter)
 
                  DELAWARE                             84-1180783
          (State of organization)           (IRS Employer Identification No.)
 
        88 BROAD STREET, BOSTON, MA                       02110
  (Address of principal executive offices)             (Zip Code)
 
                                 (617) 854-5800
               Registrant's telephone number, including area code
 
                            ------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /
 
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                        PW PREFERRED YIELD FUND II, L.P.
                     QUARTERLY REPORT ON FORM 10-Q FOR THE
                        QUARTER ENDED SEPTEMBER 30, 1998
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                            ---------
<S>                                                                                                         <C>
PART I. FINANCIAL INFORMATION:
 
  Item 1. Financial Statements
 
    Balance Sheets -- September 30, 1998 and December 31, 1997 (unaudited)................................          3
 
    Statements of Income for the three months ended September 30, 1998 and 1997 (unaudited)...............          4
 
    Statements of Income for the nine months ended September 30, 1998 and 1997 (unaudited)................          5
 
    Statements of Partner's Equity for the nine months ended September 30, 1998 and 1997 (unaudited)......          6
 
    Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 (unaudited)............          7
 
    Notes to Financial Statements (unaudited).............................................................       8-10
 
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........      11-14
 
PART II. OTHER INFORMATION:
 
  Item 1. Legal Proceedings...............................................................................         15
 
  Item 5. Other Information...............................................................................         15
 
  Item 6. Exhibits and Reports on Form 8-K................................................................         15
 
    Signatures............................................................................................         16
</TABLE>
 
                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS
 
                        PW PREFERRED YIELD FUND II, L.P.
                                 BALANCE SHEETS
                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                         SEPTEMBER 30,   DECEMBER 31,
                                                             1998            1997
                                                         -------------   ------------
 <S>                                                     <C>             <C>
 ASSETS
 Cash and cash equivalents.............................   $  2,753,413   $  4,215,247
 Rent and other receivables, net.......................        396,203        958,509
 Equipment on operating leases, net of accumulated
  depreciation of $19,146,414 and $17,565,961, at
  September 30, 1998 and December 31, 1997,
  respectively, and write-downs of $770,711 and
  $745,711 at September 30, 1998 and December 31, 1997,
  respectively.........................................     11,813,900     11,735,752
 Equipment held for sale or lease, net of accumulated
  depreciation of $218,970 and $792,493 at September
  30, 1998 and December 31, 1997, respectively, and
  write-downs of $25,000 at December 31, 1997..........         48,483        145,575
 Other assets..........................................         17,572         17,572
                                                         -------------   ------------
         Total Assets..................................   $ 15,029,571   $ 17,072,655
                                                         -------------   ------------
                                                         -------------   ------------
 LIABILITIES AND PARTNERS' EQUITY
 Liabilities:
   Accounts payable and accrued liabilities............   $     42,070   $    120,377
   Payable to affiliates (Note 2)......................        288,677        269,482
   Deferred rental income..............................         78,192         63,491
   Distributions payable to partners...................        327,523        327,523
                                                         -------------   ------------
       Total Liabilities...............................        736,462        780,873
                                                         -------------   ------------
 Partners' Equity:
   General Partners....................................        699,282        799,215
   Limited Partners:
     Class A (54,027 Units outstanding)................     11,893,843     13,555,240
     Class B...........................................      1,699,984      1,937,327
                                                         -------------   ------------
       Total Partners' Equity..........................     14,293,109     16,291,782
                                                         -------------   ------------
         Total Liabilities and Partners' Equity........   $ 15,029,571   $ 17,072,655
                                                         -------------   ------------
                                                         -------------   ------------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       3
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
                              STATEMENTS OF INCOME
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                            1998        1997
                                                         ----------  ----------
 <S>                                                     <C>         <C>
 Revenue:
   Rentals from operating leases.......................  $1,554,843  $1,795,249
   (Loss) gain on sale of equipment....................      (6,053)  1,044,415
   Interest............................................      35,217      39,432
                                                         ----------  ----------
                                                          1,584,007   2,879,096
                                                         ----------  ----------
 Expenses:
   Depreciation........................................   1,239,939   1,177,992
   Management fees (Note 2)............................      63,782     114,204
   Subordinated disposition fees (Note 2)..............       1,465       3,531
   General and administrative..........................      38,821      23,838
                                                         ----------  ----------
                                                          1,344,007   1,319,565
                                                         ----------  ----------
 Net income............................................  $  240,000  $1,559,531
                                                         ----------  ----------
                                                         ----------  ----------
 Net income allocated:
   To the General Partners.............................  $   11,999  $   47,365
   To the Class A Limited Partners.....................     220,493   1,348,754
   To the Class B Limited Partner......................       7,508     163,412
                                                         ----------  ----------
                                                         $  240,000  $1,559,531
                                                         ----------  ----------
                                                         ----------  ----------
 Net income per weighted average number of units of
  Class A Limited Partner interest outstanding.........  $     4.08  $    24.96
                                                         ----------  ----------
                                                         ----------  ----------
   Weighted average number of units of Class A Limited
     Partner interest outstanding......................      54,027      54,027
                                                         ----------  ----------
                                                         ----------  ----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       4
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
                              STATEMENTS OF INCOME
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                            1998        1997
                                                         ----------  ----------
 <S>                                                     <C>         <C>
 Revenue:
   Rentals from operating leases.......................  $4,482,319  $5,473,365
   (Loss) gain on sale of equipment....................     (18,073)    958,945
   Interest............................................     117,211      76,338
                                                         ----------  ----------
                                                          4,581,457   6,508,648
                                                         ----------  ----------
 Expenses:
   Depreciation........................................   3,666,822   3,931,157
   Write-down of equipment.............................      --         200,000
   Management fees (Note 2)............................     188,131     261,412
   Subordinated disposition fees (Note 2)..............      14,833      53,656
   General and administrative..........................     105,066      82,131
                                                         ----------  ----------
                                                          3,974,852   4,528,356
                                                         ----------  ----------
 Net income............................................  $  606,605  $1,980,292
                                                         ----------  ----------
                                                         ----------  ----------
 Net income allocated:
   To the General Partners.............................  $   30,330  $  300,793
   To the Class A Limited Partners.....................     567,216   1,497,173
   To the Class B Limited Partner......................       9,059     182,326
                                                         ----------  ----------
                                                         $  606,605  $1,980,292
                                                         ----------  ----------
                                                         ----------  ----------
 Net income per weighted average number of units of
  Class A Limited Partner interest outstanding.........  $    10.50  $    27.71
                                                         ----------  ----------
                                                         ----------  ----------
 Weighted average number of units of Class A Limited
  Partner interest outstanding.........................      54,027      54,027
                                                         ----------  ----------
                                                         ----------  ----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       5
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
                         STATEMENTS OF PARTNERS' EQUITY
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                       CLASS A     CLASS B
                                                           GENERAL     LIMITED     LIMITED
                                                          PARTNERS    PARTNERS     PARTNER       TOTAL
                                                          ---------  -----------  ----------  -----------
<S>                                                       <C>        <C>          <C>         <C>
Balance, January 1, 1998................................  $ 799,215  $13,555,240  $1,937,327  $16,291,782
Net income..............................................     30,330      567,216       9,059      606,605
Distributions declared to partners......................   (130,263)  (2,228,613)   (246,402)  (2,605,278)
                                                          ---------  -----------  ----------  -----------
Balance, September 30, 1998.............................  $ 699,282  $11,893,843  $1,699,984  $14,293,109
                                                          ---------  -----------  ----------  -----------
                                                          ---------  -----------  ----------  -----------
Balance, January 1, 1997................................  $ 653,082  $14,978,906  $2,095,535  $17,727,523
Net income..............................................    300,793    1,497,173     182,326    1,980,292
Distributions declared to partners......................   (130,263)  (2,228,613)   (246,402)  (2,605,278)
                                                          ---------  -----------  ----------  -----------
Balance, September 30, 1997.............................  $ 823,612  $14,247,466  $2,031,459  $17,102,537
                                                          ---------  -----------  ----------  -----------
                                                          ---------  -----------  ----------  -----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       6
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
                            STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                            1998         1997
                                                         -----------  -----------
 <S>                                                     <C>          <C>
 Cash flows from operating activities:
     Net income........................................  $   606,605  $ 1,980,292
     Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation....................................    3,666,822    3,931,157
       Write-down of equipment.........................      --           200,000
       Loss (gain) on sale of equipment................       18,073     (958,945)
     Change in assets and liabilities:
       Rent and other receivables, net.................      562,306      304,299
       Accounts payable and accrued liabilities........      (78,307)        (937)
       Payable to affiliates...........................       19,195      206,432
       Deferred rental income..........................       14,701       28,000
                                                         -----------  -----------
         Net cash provided by operating activities.....    4,809,395    5,690,298
                                                         -----------  -----------
 Cash flows from investing activities:
   Purchases of equipment on operating leases..........   (4,160,388)  (3,256,955)
   Proceeds from equipment sales.......................      494,437    2,421,949
                                                         -----------  -----------
         Net cash used in investing activities.........   (3,665,951)    (835,006)
                                                         -----------  -----------
 Cash flows from financing activities:
   Cash distributions paid to partners.................   (2,605,278)  (2,631,624)
                                                         -----------  -----------
         Net cash used in financing activities.........   (2,605,278)  (2,631,624)
                                                         -----------  -----------
 Net increase (decrease) in cash and cash
  equivalents..........................................   (1,461,834)   2,223,668
 Cash and cash equivalents at beginning of period......    4,215,247    2,524,801
                                                         -----------  -----------
 Cash and cash equivalents at end of period............  $ 2,753,413  $ 4,748,469
                                                         -----------  -----------
                                                         -----------  -----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       7
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
 
                       NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
 
                                  (UNAUDITED)
 
1. GENERAL
 
    The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not include
all information and footnote disclosures required under generally accepted
accounting principles for complete financial statements and, accordingly, the
accompanying financial statements should be read in conjunction with the
footnotes presented in the 1997 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1997 Annual Report.
 
    In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1998 and December 31, 1997 and results of operations
for the three and nine month periods ended September 30, 1998 and 1997 have been
made and are reflected. Operating results for the three and nine month periods
ended September 30, 1998, are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998.
 
    NEW ACCOUNTING PRONOUNCEMENT: On June 15, 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS
133 is effective for all fiscal quarters beginning after June 15, 1999 (January
1, 2000 for the Partnership). FAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The adoption
of this pronouncement does not impact the Partnership's earnings or statement of
financial position.
 
    In March 1998, the Partnership adopted the FASB issued SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for the reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances arising from non-owner sources. The adoption of this
pronouncement did not impact the reporting of the Partnership's results of
operations.
 
2. TRANSACTIONS WITH AFFILIATES
 
                        ACQUISITION AND OPERATING STAGES
 
    ACQUISITION OF EQUIPMENT: Pursuant to its investment objectives, the
Partnership has acquired, on an all-cash basis, certain leased equipment from
Equis Financial Group L.P. ("EFG") (formerly American Finance Group or AFG), an
affiliate of the Managing General Partner.
 
    The purchase price of the equipment acquired from EFG is equal to the lesser
of the adjusted cost of the equipment or the appraised value of the equipment at
the time of its acquisition by the Partnership ("EFG carrying value"). The
adjusted cost of the equipment is equal to the price paid by EFG, plus the cost
of an appraisal, EFG's cost of interim financing for the equipment and any taxes
paid by EFG, less certain interim rentals received by EFG with respect to the
equipment. The Partnership purchased equipment for purchase prices aggregating
$4,160,388 (including acquisition fees) during the nine months ended September
30, 1998.
 
                                       8
<PAGE>
                        PW PREFERRED YIELD FUND II, L.P.
 
                       NOTES TO THE FINANCIAL STATEMENTS
                         SEPTEMBER 30, 1998 (CONTINUED)
 
                                  (UNAUDITED)
 
2. TRANSACTIONS WITH AFFILIATES (CONTINUED)
    ACQUISITION FEE: The Managing General Partner, or its affiliates, receives
or is entitled to receive a fee equal to (i) 2.25% of the purchase price of
equipment purchased with net offering proceeds from the sale of Units, and (ii)
3% of the purchase price of equipment purchased with reinvested Partnership cash
flow as compensation for evaluating, selecting, negotiating and consummating the
acquisition of the equipment. The Partnership paid acquisition fees totaling
$15,929 and $121,176 during the quarter and nine months ended September 30,
1998, all of which related to equipment acquired through the reinvestment of
Partnership excess cash flow.
 
    MANAGEMENT FEES: The General Partners are entitled to receive a monthly fee
in an amount equal to 2% of gross rentals for Full Payout Leases, as defined in
the Partnership Agreement (in general, leases for which rent due over the
non-cancelable lease term exceeds the Partnership's cost of the equipment), and
5% of gross rentals for other leases (payable 66.67% to the Managing General
Partner and 33.33% to the Administrative General Partner) as compensation for
services rendered in connection with the management of the equipment. Management
fees of $63,782 and $188,131 were earned by the General Partners with respect to
the rentals earned by the Partnership during the quarter and nine months ended
September 30, 1998.
 
    DISPOSITION FEES: The General Partners, or their affiliates, are entitled to
receive a subordinated disposition fee in an amount equal to the lesser of (i)
50% of the fee that would be charged by an unaffiliated party, or (ii) 3% of the
gross contract price relating to each sale of equipment (payable 50% to the
Managing General Partner or its affiliates and 50% to the Administrative General
Partner) as compensation for negotiating and consummating sales of equipment.
Subordinated disposition fees payable with respect to equipment sales during the
quarter and nine months ended September 30, 1998 aggregated $1,465 and $14,833,
respectively. Cumulative subordinated disposition fees totaled $121,795 at such
date. These fees, which were charged to operations, are not currently payable
since their payment is subordinated to the Class A Limited Partners having
received cash distributions equal to their capital contributions, plus an 8%
annual cumulative return (as defined in the Partnership Agreement).
 
                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.
 
    The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Partnership and the Notes thereto. This report
contains, in addition to historical information, forward-looking statements that
include risks and other uncertainties. The Partnership's actual results may
differ materially from those anticipated in these forward-looking statements.
Factors that might cause such a difference include those discussed below, as
well as general economic and business conditions, competition and other factors
discussed elsewhere in this report. The Partnership undertakes no obligation to
release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
anticipated or unanticipated events.
 
YEAR 2000 ISSUE
 
    The Year 2000 Issue generally refers to the capacity of computer programming
logic to correctly identify the calendar year. Many companies utilize computer
programs or hardware with date sensitive software or embedded chips that could
interpret dates ending in "00" as the year 1900 rather than the year 2000. In
certain cases, such errors could result in system failures or miscalculations
that disrupt the operations of the affected businesses. The Partnership uses
information systems provided by Equis Financial Group Limited Partnership
("EFG") and has no information systems of its own. EFG has adopted a plan to
address the Year 2000 Issue that consists of four phases: assessment,
remediation, testing, and implementation and has elected to utilize principally
internal resources to perform all phases. Presently, EFG anticipates completing
its Year 2000 project by December 31, 1998 at a di minimus cost to the
Partnership. Aggregate costs for the entire project are anticipated to be less
than $50,000, all of which will have been expensed as incurred.
 
    EFG's primary information software was coded by IBM at the point of original
design to use a four digit field to identify calendar year. All of the
Partnership's lease billings, cash receipts and equipment remarketing processes
are performed using this proprietary software. In addition, EFG has gathered
information about the Year 2000 readiness of significant vendors and third party
servicers and continues to monitor developments in this area. All of EFG's
peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll, depreciation processing,
and electronic banking, have been evaluated for potential programming changes
and are expected to require only minor modifications to function properly with
respect to dates in the year 2000 and thereafter. Moreover, EFG understands that
each of its and the Partnership's significant vendors and third-party servicers
are in the process, or have completed the process, of making their systems Year
2000 compliant. Substantially all parties queried have indicated that their
systems will be Year 2000 compliant by the end of 1998. Presently, EFG is not
aware of any outside customer with a Year 2000 Issue that would have a material
effect on the Partnership's results of operations, liquidity, or financial
position. However, non-compliance on the part of a lessee could, under a worse
case scenario, result in lost revenues to the Partnership.
 
    EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Partnership's business operations. However, EFG has no means of ensuring that
all customers, vendors and third-party servicers will conform ultimately to Year
2000 standards. The effect of this risk to the Partnership is not determinable.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Partnership commenced its equipment reinvestment phase during 1993 by
investing excess cash flows available after the payment of the distributions to
the partners in additional equipment. As of September 30, 1998, equipment
purchased pursuant to the reinvestment program including acquisition
 
                                       10
<PAGE>
fees and expenses totaled $22,874,202, of which $4,160,388 was acquired during
the nine months ended September 30, 1998 ($546,895 was acquired during the
quarter then ended). Additional equipment will be purchased pursuant to the
reinvestment program during 1998 and in future years during the reinvestment
period (which will end in either 1999 or 2000, at the General Partners'
discretion).
 
    The Partnership invests working capital and cash flow from operations prior
to its distribution to the partners or its reinvestment in additional equipment
in short-term highly liquid investments. These investments are primarily
short-term commercial paper issued by large domestic corporations. At September
30, 1998, Partnership's cash of approximately $2.5 million was invested in
commercial paper and a fund that invests in such instruments.
 
    Cash and cash equivalents decreased $1,461,834 from $4,215,247 at December
31, 1997 to $2,753,413 at September 30, 1998. This decrease primarily
represented the amount by which distributions to partners and leased equipment
purchased pursuant to the reinvestment program exceeded cash generated by
operating activities and equipment sales.
 
    During the quarter and nine months ended September 30, 1998, the Partnership
declared distributions of cash flow received from operations in the amount of
$868,425 and $2,605,278, respectively. All distributions to the Class A Limited
Partners represented an annualized distribution rate of 11% of their contributed
capital and all distributions to the Class B Limited Partner represented an
annualized distribution rate of 10% of its contributed capital.
 
    The General Partners believe that the Partnership will generate sufficient
cash flow from operations during 1998 to enable the Partnership to meet current
operating requirements, to continue to fund cash distributions to the Class A
Limited Partners at an annualized rate of 11% on their capital contributions and
to the Class B Limited Partner at an annualized rate of 10% on its capital
contributions (substantial portions of which will constitute returns of capital
for both Classes of Limited Partners) and to provide excess cash for
reinvestment in additional leased equipment.
 
    Distributions may be characterized for tax, accounting and economic purposes
as a return of capital, a return on capital or both. The portion of each cash
distribution by a partnership, which exceeds its net income for the fiscal
period, may be deemed a return of capital. Based upon the amount of net income
reported by the Partnership for accounting purposes, approximately 75% of the
11% cash distributions to the Class A Limited Partners for the nine months ended
September 30, 1998 constituted a return of capital. Additionally, since
inception, approximately 74% of the Class A Limited Partner's 11% cash
distributions constituted a return of capital. However, the total actual return
on capital over a leasing partnership's life can only be determined at the
termination of the Partnership after all residual cash flows (which include
proceeds from the re-leasing and sale of equipment after initial lease terms
expire) have been realized.
 
RESULTS OF OPERATIONS
 
    Substantially all of the Partnership's revenue during the quarter and nine
months ended September 30, 1998 was generated from the leasing of the equipment
to unaffiliated third parties under triple net leases which were in effect at
the time the equipment was acquired by the Partnership. The balance of the
Partnership's revenue consisted of interest income from temporary investments
offset by a net loss on equipment sales.
 
    Under the terms of the triple net leases, all expenses related to the
ownership and operation of the equipment during the quarter and nine months
ended September 30, 1998 were paid for by the lessees. The Partnership recorded
depreciation expense pertaining to the equipment and incurred management fees
and certain general and administrative expenses in connection with the
operations of the Partnership. General and administrative expenses consisted
primarily of investor reporting expenses and transfer agent and audit fees.
 
                                       11
<PAGE>
1998 COMPARED TO 1997
 
    The Partnership reported net income of $240,000 and of $606,605 for the
quarter and nine months ended September 30, 1998 ("1998 Quarter" and "1998
Period") as compared to net income of $1,559,531 and $1,980,292 for the quarter
and nine months ended September 30, 1997 ("1997 Quarter" and "1997 Period"). The
principal reason for the decrease in net income in the 1998 Quarter and 1998
Period as compared to the 1997 Quarter and 1997 Period was a decline in rental
income and the recognition of a gain on sale of equipment in 1997 as compared to
a loss in 1998.
 
    Rental income decreased by $240,406 and $991,046, or 13% and 18%,
respectively, during the 1998 Quarter and 1998 Period as compared to the 1997
Quarter and 1997 Period, principally due to the sale of equipment upon lease
expiration subsequent to the 1997 Quarter (which was earning rental revenue in
the 1997 Quarter) and the renewal of certain equipment at lower rates, partially
offset by rentals from equipment purchased on or after September 30, 1997.
 
    Interest income was $35,217 and $117,211 for the 1998 Quarter and 1998
Period, respectively compared to $39,432 and $76,338 for the 1997 Quarter and
1997 Period. Interest income is generated from temporary investment of rental
receipts and equipment sale proceeds in short-term instruments. The overall
increase in interest income in the 1998 Period as compared to the 1997 Period
was due to a greater availability of cash used for investment prior to
distribution to the Partners and the purchase of additional equipment. Future
interest income will fluctuate in relation to prevailing interest rates and the
collection of lease revenue and equipment sale proceeds.
 
    Depreciation and amortization expense increased by $61,947, or 5% in the
1998 Quarter and decreased by $264,335, or 7% in the 1998 Period as compared to
the 1997 Quarter and 1997 Period. The decrease in equipment subject to operating
leases (attributable to equipment sold subsequent to the 1997 Quarter offset by
equipment purchased subsequent to the 1997 Quarter) was the primary reason for
the 1998 Period reduction.
 
    Management fees incurred by the Partnership decreased by $50,422 in the 1998
Quarter as compared to the 1997 Quarter and $73,281 in the 1998 Period as
compared to the 1997 Period. The decrease in management fees is attributable to
the decrease in rental revenue upon which such fees are based.
 
    The Partnership incurred subordinated disposition fees with respect to
equipment sold during the 1998 Quarter and 1998 Period of $1,465 and $14,833,
respectively, as compared to $3,531 and $53,656 for the 1997 Quarter and 1997
Period, respectively. The decrease in disposition fees is attributable to a
decrease in equipment sales upon which such fees are based.
 
                                       12
<PAGE>
                           PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
    None.
 
ITEM 5. OTHER INFORMATION
 
    On October 20, 1998, Paul L. Novello, Vice President, Treasurer and Chief
Financial Officer of the Administrative General Partner resigned.
 
    On October 20, 1998, Carmine Fusco was named Vice President, Secretary,
Treasurer and Chief Financial and Accounting Officer of the Administrative
General Partner.
 
    Carmine Fusco, age 30, is Vice President, Secretary, Treasurer and Chief
Financial and Accounting Officer of the Administrative General Partner, he also
serves as an Assistant Vice President within the Private Investments Department
of PaineWebber Incorporated. Mr. Fusco was previously employed as a Financial
Valuation Consultant in the Business Valuation Group of Deloitte & Touche, LLP
from January 1997 to August 1998. He was employed as a Commodity Fund Analyst in
the Managed Futures Department of Dean Witter Reynolds Incorporated, from
October 1994 to November 1995. Prior to joining Dean Witter, Mr. Fusco was a
Mutual Fund Accountant with the Bank of New York Company, Incorporated. He
received his Bachelor of Science degree in Accounting and Finance in May 1991
from Rider University and a Master of Business Administration from Seton Hall
University in June 1996. Mr. Fusco is a Chartered Financial Analyst candidate.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
    (a) None.
 
    (b) The Partnership did not file any reports on Form 8-K during the third
        quarter of the fiscal year ending December 31, 1998.
 
                                       13
<PAGE>
                                   SIGNATURE
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
                 PW PREFERRED YIELD FUND II, L.P. (REGISTRANT)
 
<TABLE>
<S>        <C>
By:        General Equipment Management II, Inc.
           A General Partner
 
By:        /s/ CARMINE FUSCO
           ------------------------------------------
           Carmine Fusco
           Vice President, Secretary,
           Treasurer and Chief Financial
           and Accounting Officer
 
Date:      November 13, 1998
           ------------------------------------------
</TABLE>
 
                                       14